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CALIFORNIA CORPORATE & SECURITIES LAW

A Field Guide To Distinguishing Directors From Officers

A colleague who is not a corporate lawyer recently noted that in common parlance directors and officers are often simply lumped together as the “same thing”.   He suggested that I devote a post to a primer on the differences between directors and officers.  As requested, here is my take on the subject: Directors can not act alone…

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Even If Enacted, The CHOICE Act May Not Repeal The SEC’s Pay Ratio Rule

While prognosticators continue to place odds on whether the Financial CHOICE Act of 2017, H.R. 10, will be enacted, many commentators are claiming that it will “repeal” the Securities and Exchange Commission’s pay ratio rule.  Even if H.R. 10 is enacted, I’m not so sure that it would “repeal” the pay ratio rule. It is certainly true…

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Fictitious Name Use Fails To Engender Standing Or Jurisdictional Issue

California Code of Civil Procedure Section 367 requires that every action must be prosecuted in the name of the real party of interest.  What happens when a plaintiff sues under a fictitious business name of a dissolved foreign limited liability company?  Yesterday, the Court of Appeal answered that question in The Rossdale Group, LLC v.…

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State Controller Defeats Judgment Creditor’s Claim To Escheated Funds

Here is the question: Can a judgment creditor can enforce an assignment issued pursuant to the Enforcement of Judgments Law (CCP § 680.10 et seq.) for escheated property pursuant to the Unclaimed Property Law (CCP § 1500 et seq.) when the judgment debtor is a suspended corporation pursuant to the Revenue & Taxation Code §…

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A Shareholder Consent In Its Dotage May Or May Not Be Valid

California Corporations Code Section 603(a) broadly authorizes shareholder action by written consent: Unless otherwise provided in the articles, any action that may be taken at any annual or special meeting of shareholders may be taken without a meeting and without prior notice, if a consent in writing, as specified in [Corporations Code] Section 195, setting…

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Is There A “Revlon Duty” In California?

There are certain seminal Delaware corporate law cases that are so well known that corporate lawyers are wont to assume that they have been adopted and followed everywhere.  One such case is Revlon, Inc. v. MacAndrews & Forbes Holdings, Inc., 506 A.2d 173 (1986).  In that case, the Delaware Supreme Court famously proclaimed that once…

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Did The Harvard Shareholder Rights Project Prove Itself Wrong?

In December 2014, Stanford Law School Professor Joseph A. Grundfest and Daniel M. Gallagher incited an academic titanomachy when they released a draft of an academic paper provocatively entitled “Did Harvard Violate Federal Securities Law?  The Campaign Against Classified Boards of Directors“.  In this case, “Harvard” was the Harvard Shareholder Rights Project which described itself as “a clinical program operating at…

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California And Van Gorkom

As a corporate lawyer, it is hard to ignore the Delaware Supreme Court’s opinion in Smith v. Van Gorkom, 488 A.2d 858 (1985) overruled on other grounds Gantler v. Stephens, 965 A.2d 695 (Del. 2009).  Professor Stephen Bainbridge has called it “one of the most important corporate law decisions of the 20th century” and Bernard Sharfman has…

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California And The “Entitled To Vote” Standard

Recently, I came across a proxy statement for a California corporation that stated the vote required for shareholder action on several proposals was “the affirmative vote of the majority of the shares represented at the Annual Meeting and entitled to vote on such matter”.  While this statement was consistent with the voting standard enunciated in…

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Failure To Return Shares Subject To Repurchase Right Supports Conversion Claim

Closely held issuers often include a repurchase right in their equity award agreements.  I expect that in most cases, shareholders will comply with these provisions.  When a shareholder doesn’t, the company’s most obvious cause of action will be for breach of contract.  Conversion is a less obvious cause, but according to the California Court of Appeal, a viable claim nonetheless. …

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